Lululemon Rally Has Legs; Here’s How to Ride It

Rather than buying a stock that has surged, get paid to wait, and buy the shares if they fall dramatically.

Don’t chase Lululemon. It’s better to sell puts to try to profit off the stock’s extraordinary momentum rather than jumping into the shares at this level. Just yesterday, the stock surged 10% in reaction to a strong earnings report, and it’s up nearly 30% year-to-date.

When Lululemon Athletica (ticker: LULU) was at $66.72, investors could sell the September $65 puts for $5.50. Investors comfortable with a 10-month position can sell...